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"wins an auction for an item at a low bid"
With low value items there is no point wasting money on tracking, is there?
"comply with eBay policies "
Actually eBay has little to do with it. You are looking at universal rules whereby a seller - wherever located - is responsible to get the goods to the buyer. It does not matter if the goods were purchased through eBay, directly from your website or from your advertisement in a magazine. The seller is always responsible to gets the goods to the buyer.
If a buyer does not receive the goods paid for, a claim will be filed with the credit card issuer or payment service such as PayPal and the money will be refunded to the buyer from funds taken back from the seller.
Mail order business has been around for hundreds of years using the same principles. Using the internet as a venue does not change the basic principles of commerce.
@thebarterersdog wrote:
My question, and all I want to hear about, is has this catch 22 happened to anyone else with international tracked shipping issues? And if so, has anyone any suggestions as to what to do.
The answer to your first question is that yes, this Catch 22 would happen to all of us (especially non-U.S. sellers who don't have access to the GSP) unless we take control and make some hard decisions.
In effect, eBay has put sellers in the position of more or less being obliged to use tracking to avoid INR claims, while on the other hand, heavily promoting free shipping to buyers on this site (through various policies, advertisements and incentives). Ergo, you have a whole lot of buyers everywhere who expect to get anything they buy off eBay with free -- or at least cheap -- shipping. Just take a look at the ads eBay runs on its landing pages. The problem is that this creates a serious dilemma for smaller sellers listing relatively low-priced items (as you've experienced). It's a d___d if you do, d____d if you don't situation, a classic Catch 22.
As for suggestions in this particular instance, my only response would be to attempt to communicate with the buyer and see if he/she would prefer to cancel the transaction entirely, if that can still be done.
Then reconsider whether the odd sale to such countries is worth it -- make a cool-headed risk assessment based on your sales history and your ability to absorb an occasional defect (i.e. your volume of transactions).
Let me put it another way: don't necessary cave in to eBay's pressure to use tracking if you have enough offshore sales that you can afford to take an occasional INR hit by using non-tracked air shipping services. This is especially true if the majority of your offshore sales are, say, under $100 and don't warrant tracked shipping in the first place. So the item cost may be a determining factor for particular listings and permit you to use tracking.
I'd be in precisely the same boat as you describe, over and over and over again, if I hadn't decided to stop shipping lower-priced items to far-flung places that were unlikely to generate many sales, but very likely to generate shipping problems, either because of the possibility of INRs, or the cost of shipping. I do make exceptions (such as Australia & NZ) for English-speaking countries where I know there won't be a communication issue should a problem arise.
It's a sad but true reality that eBay is not now what it was even 4 years ago, when buyers understood they always had to pay exact shipping, sellers could happily ship worldwide without tracking or fear of punishment to their seller status. The site was geared to support smaller, independent sellers. We have to face the reality that eBay has now stacked the decks in favour of high volume, big commercial sellers who can either afford to subsidize shipping, or can afford to absorb INR hits without blinking an eye.
As a smaller seller, I've had to make some really hard decisions about shipping in order to be able to continue to sell at all. Unfortunately this has cut off about 1 in 20 of my potential sales (to places like Turkey and elsewhere). But it's also meant avoiding most issues associated with those sales. Specifically, I had to decide, given eBay's draconian policies, whether to ship at any risk to my seller status, or accept fewer sales but to places (or for items) where I have more control over the outcome and therefore am able to stay on top as a seller.
I don't say it's easy to adapt to the new reality, but I think a lot of sellers are still operating as if they were on the eBay of 5 years ago, and ultimately eBay will punish them for that belief. The bottom line is that we smaller sellers must realize eBay doesn't want us anymore as its "core". Whatever it takes to survive is what must be done, as far as I'm concerned -- i.e. eBay is not my friend anymore. I am now always wary. 
By the way, I disagree with Pierre in one regard: not all online venues are alike. EBay has, over the past 2 or 3 years, deliberately developed policies to favour and provide advantages to, the big sellers of brand name products that it wants on this site. It is now anything but a level playing field.
If you don't believe me, take a look at a comment made by one of the eBay.ca managers several Wed. board sessions ago. He let slip that the whole purpose of a particular policy (which a small seller was asking about) was to support and accommodate eBay's largest volume sellers. There you have it. How much clearer does it have to be? Those small sellers who don't wake up and smell the coffee will be weeded out by policy infractions, INRs, defects, cases, etc. etc. etc. -- which, as I see, is exactly what eBay wants now.
In a nutshell: do what you can to protect yourself, even if it means adjusting to lower margins and higher costs.
